2016 (12) TMI 440 - AT - Service Tax

Business auxiliary service - Appellant is a provider of service under the category of Courier Service falling under Section 65(33) of the Act. Service tax demanded in respect of co-loader services provided by the appellant to other courier service companies for delivery of domestic courier packets as well as imported courier packets - packets booked for delivery to other countries on the ground that the activity did not belong to export of service since no foreign exchange was realised for these transactions by the appellant - Held that - The provision of courier service involves collecting the goods from the person booking the consignment, transporting the same to the destination and ultimate delivery by hand to the recipient - The consideration for the service also will be collected by the agency. In the present case, where the appellant has worked as co-loader their role is limited to delivery of the packets to the ultimate customer. For this activity, they have received consideration from the first courier agency. From the nature of the activity undertaken by the appellant, it cannot be said that they have carried out courier service on behalf of another - The transaction between the appellant and the other courier agency is on principal to principal basis. It cannot be said that the service has been rendered on behalf of the courier agency. Consequently, activity cannot be covered under the definition of BAS and hence this part of the demand cannot be sustained. The appellant has received certain amounts from abroad for delivery of incoming courier packets. They have also received some amounts for the courier consignments exported on collect basis. The claim of the appellant is that this amounts to export of service and hence no service tax is leviable. The demand for service tax has been made for the reason that the payment has not been received in convertible foreign exchange - the amount has been received by the appellant by way of adjustment out of the amounts - Held that - The Notification No.21/2003-ST, dated 20.10.2003 exempts from payment of service tax, amounts received in convertible foreign exchange. We know that but for the amount due to be paid by the appellant to foreign courier companies, they would have received the considerations in foreign exchange for the service rendered by them to foreign courier companies for delivery in India. It cannot be said that on account of the adjustment, the consideration has not been received in foreign exchange. We are of the view that the condition of Notification No.21/2003-ST is to be considered as satisfied in the present case. Consequently this part of the service tax demand also merits to be set aside. Demand set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues involved:
1. Service tax demand on co-loader services provided by the appellant to other courier service companies under Business Auxiliary Service (BAS).
2. Service tax demand on amounts received by the appellant from abroad for delivery of incoming courier packets and courier consignments exported on collect basis.

Analysis:

Issue 1:
The appellant, a provider of courier services, challenged the service tax demand on co-loader services provided to other courier agencies. The Department sought to charge tax under BAS, claiming the activity as providing courier service on behalf of other agencies. However, the CBEC clarified that co-loader services are not covered under courier service for service tax levy. The appellant's role was limited to delivering packets to the recipient, not providing a full courier service. The Tribunal noted that the appellant's activity did not qualify as provision of service on behalf of the client, as required under BAS. The transaction was on a principal to principal basis, and the service cannot be considered as falling under BAS. Thus, this part of the demand was set aside, and the appeal was allowed.

Issue 2:
Regarding the second part of the demand, the appellant received amounts from abroad for courier services, which they claimed as export of service exempt from service tax. The Department contended that since the payment was not in convertible foreign exchange, service tax was leviable. However, the Tribunal found that the appellant received the amounts by adjusting them against payments owed to foreign courier companies. This adjustment constituted receipt in foreign exchange, satisfying the conditions of Notification No.21/2003-ST, which exempts amounts received in convertible foreign exchange from service tax. Therefore, this part of the service tax demand was also set aside, and the appeal was allowed.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, finding in favor of the appellant on both issues.